UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended: JUNE 30, 2001
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Commission file number 0-21418

TREATS INTERNATIONAL ENTERPRISES, INC.

Delaware 13-3495199
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418 Preston Street, Ottawa, Ontario, Canada
K1S 4N2
(613) 563-4073

Securities registered pursuant to Section 12(g) of the Act.
Common Stock $.001 par value

FORM 10-K

SECURITIES & EXCHANGE COMMISSION
--------------------------------
Washington, D.C. 20549

TREATS INTERNATIONAL ENTERPRISES, INC.
--------------------------------------

ADDRESS OF PRINCIPAL EXECUTIVE OFFICER:
418 Preston Street
Ottawa, Ontario
Canada, K1S 4N2

Telephone No.: (613) 563-4073

U.S. ADDRESS OF TREATS INTERNATIONAL ENTERPRISES INC.

c/o Vincent J. Profaci
Attorney at law
Vincent J. Profaci, P.A.
932 Center Circle, Suite 1000
Altamonte Springs, Florida 32714
United States of America

Telephone No.: (407) 673-1144

Indicated by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part 111 of this Form 10-K
or any amendment to this Form 10-K. [X]

The aggregate market value of the voting stock held by non-affiliates of the
registrant is U.S. $1,851,203. The aggregate market value held by non affiliates
was $1,018,145. The aggregate market value was computed by reference to the
average bid and asked prices as of October 12, 2001. (US $0.12)

It was assumed for determination of affiliates, that all principal shareholders
over 10% and officers are affiliated.

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.

Common Stock $.001 par value 15,426,692
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Title of Class Shares outstanding at November 08, 2001

DOCUMENTS INCORPORATED BY REFERENCE

TREATS INTERNATIONAL ENTERPRISES, INC.

FORM 10-K

FOR THE YEAR ENDED JUNE 30, 2001

INDEX PAGE
PART I
Item 1 Business..........................................................5 - 11
Item 2 Properties............................................................11
Item 3 Legal Proceedings................................................11 - 12
Item 4 Submission of Matters to a Vote of Security Holders...................12

PART II
Item 5 Market for the Registrant's Common Equity
and Related Stockholder Matters.......................................13
Item 6 Selected Financial Data..........................................13 - 14
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations....................15 - 25
Item 7-A Quantitative and Qualitative Disclosure about
Market Risk...........................................................25
Item 8 Financial Statements and Supplementary Data......................26 - 47
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure................................48

PART III
Item 10 Directors and Executive Officers of the Registrant....................49
Item 11 Executive Compensation................................................50
Item 12 Security Ownership of Certain Beneficial Owners
and Management...................................................51 - 52
Item 13 Certain Relationships and Related Transactions........................52

PART IV
Item 14 Exhibits, Financial Statement Schedules, and
Reports on Form 8-K..............................................53 - 55

AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULES..................................56
SIGNATURES.........................................................................57

FORWARD-LOOKING STATEMENTS

The forward-looking statements included in the "Business", "Legal Proceedings"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" sections, which reflect management's best judgment based on factors
currently known, involve risks and uncertainties. Words such as "expects",
"anticipates", "believes", "intends", "hopes" and variations of such words and
similar expressions are intended to identify such forward-looking statements.
Actual results could differ materially from those anticipated in these
forward-looking statements as a result of a number of factors, including but not
limited to, the factors discussed in such sections and those set forth in the
cautionary statements contained in the Safe Harbor Statement in this Form 10-K.
(See Item 7 - Safe Harbor Statement) Forward-looking information provided by the
Company in such sections pursuant to the Safe Harbor Statement established under
the Private Securities Litigation Reform Act of 1995 should be evaluated in the
context of these factors.

PART I

ITEM 1 BUSINESS
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Treats International Enterprises, Inc. (the"Company") is an international
franchisor carrying on the business of selling the right to market the Treats
System. The Treats System entails the preparation and sale of cookies, muffins
and other specialty bakery items, gourmet and specialty coffees as well as
related food and beverage products in retail stores using a system and
methodology of marketing developed and designed by the Company and identified by
the trademark TREATS.

The Company operates its business through its wholly-owned subsidiary Treats
Inc. Treats Inc. ("TI") is the parent company to a number of other entities,
specifically:

CHOCOLATE GOURMET TREATS LIMITED ("CGTL")
TREATS ONTARIO INC.("TOI")
TREATS CANADA CORPORATION ("TCC")

As at September 5, 2001, there are 109 retail units in North America utilizing
the Treats System. 104 of these units are owned and operated by franchisees; 5
are corporately managed.

The Company grants both single unit franchises and area development franchises
throughout Canada and the United States. While there are currently no operations
outside of North America, it is the Company's intention to sell National
Licenses in the future. The Company has taken no steps to comply with any other
International government franchise regulatory agencies.

ITEM 1 BUSINESS (CONT'D)
- --------------------------------------------------------------------------------

The Company markets essentially three variations on the Treats concept. The
Treats Bakery, usually 250 - 500 square feet in size with no seating area of its
own, the Treats Bakery Cafe, commonly 500 - 2,000 square feet in size with its
own seating arrangement and the Treats International Coffee Emporium, normally
500 - 2,000 square feet with its own seating arrangements. Treats stores are
found in a variety of locations including office complexes, shopping malls,
mixed use properties (commercial location with a shopping area), street front
locations, transportation terminals and universities. The Company seeks
locations or sites with significant pedestrian traffic, where high visibility
prevails.

For substantially all single store franchises in Canada, one of the Company's
subsidiaries has entered into a lease ("Head Lease") with the relevant landlord
and the location is sub-leased at the same terms, including rental rates, to the
franchise owner. The Head Lease is the lease agreement between the landlord and
the entity which signs it ("Tenant"). The Tenant is bound by the terms and
conditions thereof.

Generally for stores opened by an Area Franchisee, the Area Franchisee enters
into the Head Lease directly and the Head Lease is collaterally assigned to the
Company or one of its subsidiaries. The collateral assignment means the Company
does not have all the rights and obligations associated with entering into the
Head Lease. It does, however, give the Company the right, but not the
obligation, to assume the franchisee's position under the Head Lease if the
franchisee defaults under its obligations under the Area Franchise Agreement
with the Company. Franchisee in this context means the person who enters into
the Franchise Agreement in a location covered under an Area Franchise Agreement.

Treats' franchisees prepare their baked goods on site daily in order to ensure
wholesomeness and to attract customers with provocative fresh baked smells. The
Company's principal products are prepared according to proprietary recipes in
many cases using dry mixes which have been manufactured to the Company's
specifications by the Quaker Oats Company of Canada and coffees blended to
Treats specifications by Nestle Canada.

The Company has no vertical integration with any of the companies manufacturing
its bakery mixes and coffee blends. Its proprietary products are primarily sold
to the franchised stores only although the Company is in the process of
examining other retail opportunities using E-Commerce.

The Company is a Delaware corporation, organized in 1988.

INDUSTRY OVERVIEW
The market for muffins, cookies and related specialty baked goods as well as
coffee products, including gourmet and specialty coffees is large, fragmented
and growing. The Specialty Coffee/Specialty Baking franchise concept has been a
successful addition to the quick service segment of food franchising. The quick
service market-segment continues to grow.

ITEM 1 BUSINESS (CONT'D)
- --------------------------------------------------------------------------------

Management believes this growth has been driven by a much greater consumer
awareness and appreciation of gourmet and specialty coffee and fresh baked goods
as a result of their increasing availability as well as the increase in demand
for all fresh premium food products where the price differential from the
commercial brands is relatively small compared to the perceived improvement in
product quality and taste.

In Canada, the Specialty Baking segment is dominated by two major chains: Treats
and MMMarvellous MMMuffins (100 plus locations). Several smaller concepts
operate regionally and a number of US Franchisors, including Mrs. Fields Cookies
have a national presence in Canada. Treats has competed in this segment in
Canada since 1977 always with a strong commitment to quality, a significant
operational support program and a very strong emphasis on coffee.

In the Specialty Coffee segment a number of large national chains have
established a strong presence in North America. The most significant chains are:
Starbucks with approximately 4,500 corporately owned, licensed and joint-venture
locations, Diedrich Coffee Co. with approximately 400 locations under a variety
of brand names, including Gloria Jeans and Second Cup also with approximately
400 locations. However there are a number of other large chains with strong
national, regional and niche presence.

While these competitors have already established a significant presence, they
have also created a rapidly expanding market for coffee related concepts. Treats
has a unique concept and an operating methodology that will allow it to compete
favourably. Treats' strong emphasis on specialty, gourmet and flavoured coffees
in both existing and new Treats locations, positions the concept for growth and
expansion.

Specialty coffee sales as a percentage of total coffee sales in North America
have been increasing steadily. According to the National Coffee Association,
sales of specialty coffee grew from approximately 17% to more than 30% of total
coffee sales in the United States from 1989 through 2000.

According to the National Coffee Association's 2000 study, 54% of Americans
drink, on average 3.1 cups per day. The North American coffee market consists of
three distinct product categories: (1) commercial ground roast,
mass-merchandised coffee and (2) specialty coffees, which include gourmet
coffees (premium grade arabica coffees sold in whole bean and ground form) and
(3) premium coffees (upscale coffees mass-marketed by the leading coffee
companies).

ITEM 1 BUSINESS (CONT'D)
- --------------------------------------------------------------------------------

Treats believes that several factors have contributed to the increase in demand
for gourmet coffee including:

- greater consumer awareness of gourmet coffee as a result of its increased
availability and significant market awareness of some of the larger coffee
concept chains;
- increased quality awareness by consumers;
- increased demand for all premium food products, including gourmet coffee;
and
- the decline in alcoholic beverage consumption.

The Specialty Coffee Association of America estimates that the number of
specialty coffee beverage outlets in North America had increased to over 10,000
by the end of 2000. The Company believes that, even with the continued growth in
the number of specialty coffee stores, the market is fragmented and, with the
exception of Starbucks and a few other smaller chains, remains relatively
unbranded.

Finally it must be recognized that there are many other concepts which compete
in a very similar environment and market as Treats. The most significant of
these concepts are the donut chains which, in Canada, are dominated by Tim
Horton's with more than 2,000 outlets.

THE FLOUR MARKET - BAKED GOODS
The dominant factor for the continued growth in the baked goods market in North
America is the health and diet conscious consumer seeking foods that are
nutritious and fun to eat. New bakery products continue to be introduced at a
rate which exceeds that of the overall food industry.

The North American per capita flour products consumption has risen from an
average of 118 Lbs. in 1984 to 130 Lbs. in 1990 and is forecasted to exceed 200
Lbs. by the year 2002. With "in-store" and wholesale bakery products accounting
for most of the gains in the traditional baking products, (3% growth per annum)
Treats is well positioned for growth.

THE COFFEE MARKET
According to the National Coffee Association's 1998 National Coffee Drinking
Trends report, approximately 65% of all consumers (age 10+) drink coffee on a
weekly basis, they drink an average of 3.3 cups per day, and the overall number
of coffee drinkers has grown approximately 20%. The gourmet coffee segment of
the industry has experienced strong growth over the past decade and is expected
to continue to grow through the end of the century. Research from CREST, a
market research firm, indicates specialty coffee shop category traffic has shown
positive, often double digit, growth since 1995.

ITEM 1 BUSINESS (CONT'D)
- --------------------------------------------------------------------------------

TRAINING AND DEVELOPMENT
The Company's strategy is to place strong emphasis on identifying and retaining
qualified franchisees and employees, and invest substantial resources in
training them in customer service, beverage and food preparation, and sales
skills. The Company believes that the friendliness, speed and consistency of
service and the product knowledge of the Company's franchisees and employees are
critical factors in developing the Company's quality brand identity and to
building a loyal customer base.

EXPANSION
The Company plans to open approximately 8 franchised stores in Canada in the
current fiscal year, primarily in existing markets. The Company has adopted a
policy of not developing stores for its own operation and is in the process of
franchising all stores currently operated by the Company.

The ability of the Company to open new stores is affected by a number of
factors. These factors include, the ability to attract suitable and qualified
franchise owners, constraints among other things, selection and availability of
suitable store locations, negotiation of suitable lease or financing terms, and
construction of stores. Accordingly, there can be no assurance that the Company
will be able to meet planned growth targets.

The Company's expansion strategy is to cluster stores in targeted markets,
thereby increasing consumer awareness and enabling the Company to take advantage
of operational, distribution and advertising efficiencies. The Company believes
that market penetration through the opening of multiple stores within a
particular market should result in increased average store sales in that market.
In determining which new markets to develop, the Company considers many factors,
including its existing store base, the size of the market, demographic and
population trends, competition, availability and cost of real estate, and the
ability to supply product efficiently.

RAW MATERIALS
The Company and its franchisees have not experienced any material shortages of
food, equipment, fixtures or other products which are necessary to restaurant
operations. The Company anticipates no such shortages of products and, in any
event, alternate suppliers and distributors are available.

TRADEMARKS AND SERVICE MARKS
The Company's rights in its trademarks and service marks are a significant part
of its business. The Company is the owner of the following Trade Marks:

ITEM 1 BUSINESS (CONT'D)
- --------------------------------------------------------------------------------

- TREETS
- CHOCOLATE GOURMET TREATS
- CHOCOLATE GOURMET TREATS & design
- LESBONS TREATS
- TREATS & design
- TREATS
- TREATS BAKERY CAFE
- NOBODY TREATS YOU BETTER
- MONOGRAM COOKIES
- TREATS BAKERY AND YOGURT EMPORIUM
- CREPE ETC.
- TREATS FROZEN YOGURT...HALF THE CALORIES, TWICE THE FUN
- TREATS INTERNATIONAL COFFEE EMPORIUM & design
- TREATSATIONS
- BAGUETTE EXPRESS
- TREATS (Word)

These trademarks are registered in Canada and some of these trademarks are
registered in foreign countries including the U.S.A.

The Company is aware of a number of companies which use various combinations of
the word Treats in their names and/or services, none of which, either
individually or in the aggregate, are considered to materially impair the use by
the Company of its mark. It is the Company's policy to vigorously oppose any
infringement of its trademarks. The Company generally intends to renew
trademarks and service marks as they expire.

SEASONALITY
The Company's business is moderately seasonal. Average restaurant sales are
normally higher during the fall and spring months than during the summer months.

RESEARCH AND DEVELOPMENT
The Company conducts ongoing development of new menu items and test markets such
items, as well as new company-developed food marketing aids, in selected
outlets. Although such research and development activities are important to our
business, the amounts that have been expended for these activities have not been
material.

ITEM 1 BUSINESS (CONT'D)
- --------------------------------------------------------------------------------

COMPETITION
The quick service segment including the specialty bakery/specialty coffee
segment are intensely competitive and there are many well established
competitors with substantially greater financial and other resources than the
Company. Although competition in the specialty coffee market is currently
fragmented, the Company continues to be competitive. The competition in the
specialty bakery market is also fragmented. The Company competes and, in the
future will continue to compete with MMMarvelous MMMuffins, Company's Coming,
Tim Horton's, a host of bagel concepts and other donut concepts. Current
competitors or one or more new major competitors with substantially greater
financial, marketing, and operating resources than the Company could enter the
market at any time and compete directly against the Company. In addition, in
virtually every major metropolitan area in which the Company operates or expects
to enter, local or regional competitors already exist. The Company's coffee
beverages compete directly with all restaurant and beverage outlets that serve
coffee and a growing number of espresso stands, carts and stores. The Company's
bakery products compete directly against all restaurant and bakery outlets that
serve muffins, cookies and bagels, and other baked goods including the bakery
section of supermarkets. The Company believes that its customers choose among
retailers primarily on the basis of product quality, service and convenience
and, to a lesser extent, on price. The Company also expects that competition for
suitable sites for new stores will be intense. The Company competes against
other specialty retailers and restaurants for these sites, and there can be no
assurance that management will be able to continue to secure adequate sites at
acceptable rent levels. The Company also competes with many franchisors of
restaurants and other business concepts with respect to the sale of franchises.

EMPLOYEES
At June 30, 2001, the Company had 46 employees, of whom 33 were store personnel
and 13 were corporate personnel. Most store personnel work part time and are
paid on an hourly basis. The Company has never experienced a work stoppage and
its employees are not represented by a labour organization. The Company believes
that its employee relations are good.

ITEM 2 PROPERTIES
- --------------------------------------------------------------------------------

The Company owns the land and building of its head office at 418 Preston Street,
Ottawa.

ITEM 3 LEGAL PROCEEDINGS
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Two judgements in the total amount of $127,463 were issued against two of the
Company's wholly owned subsidiaries. Judgement in the amount of $73,628 is
against a subsidiary company with no assets. It is managements' opinion that a
co-judgement of $53,835 will be settled whereby, the co-defendant and/or a third
party not related to the Company and its wholly owned subsidiaries will be
responsible for the judgement and accordingly, no provision has been recorded.

ITEM 3 LEGAL PROCEEDINGS (CONT'D)
- --------------------------------------------------------------------------------

The Company is a defendant in several actions brought by former franchisees,
including a former franchisee of a former national licensor, and landlords
arising in the normal course of business. The Company has counterclaimed these
actions and management is of the opinion that these claims are without merit. As
the outcome of these claims is not determinable at this time, these financial
statements do not include a provision for potential losses. Liabilities, if any,
resulting from these claims in subsequent years will be recorded as the expenses
are incurred.

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- --------------------------------------------------------------------------------

No matters were submitted to a vote of Security Holders in the fourth quarter.

PART II

ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
- --------------------------------------------------------------------------------

The Company's securities, primarily the Units, Stock and Warrants, have been
quoted in the over-the-counter market since August 1989. The number of record
holders of The Company's Common Stock at June 30, 2001 was 1,530 and at June 30,
1999, was 1,522. The number of issued and outstanding Common Shares as at
September 30, 2001 was 15,426,692. Management does not know the number of
beneficial holders of the shares of Common Stock. Commencing in January 1992,
the Common Stock has been quoted separately. Management has no knowledge whether
the volume of trading since January 31, 1992 constitutes an active market or
whether an active market will develop.

Through December 31, 1991, the high and low bid and asked prices for The
Company's Units were reported in the NASDAQ pink sheets.

Starting February 1992 to June 21, 1993, the Common Stock was quoted on the
computerized bulletin board of NASDAQ under the symbol TRTN.

As of June 21, 1993, the Common Stock has been quoted on the computerized
bulletin board of NASDAQ under the symbol TIEI.

As of July 10, 2000, subsequent to a 1 for 3 reverse stock split, the Common
Stock has been quoted on the computerized bulletin board of NASDAQ under the
symbol TRIE.

ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS (CONT'D)
- --------------------------------------------------------------------------------

The following table set forth the high and low bid and asked prices for The
Company's stock. Prices represent quotations between dealers without adjustment
for retail mark-ups, markdowns or commissions, and may not represent actual
transactions.

QUARTER ENDED HIGH BID LOW BID HIGH ASKED LOW ASKED
- ------------- -------- ------- ---------- ---------
(US $) (US $) (US $) (US $)

September 30, 2000(1) 0.38 0.16 0.38 0.16
December 30, 2000 0.50 0.22 0.50 0.22
March 30, 2001 0.33 0.23 0.33 0.23
June 30, 2001 0.28 0.02 0.28 0.02

(1) As of July 10, 2000, subsequent to a 1 for 3 reverse stock split, the Common
Stock has been quoted on the computerized bulletin board of NASDAQ under
the symbol TRIE.

ITEM 6 SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------

The following chart of selected financial data of the Company for five fiscal
years are derived from the consolidated financial statements of the Company. The
Company presents its financial results in Canadian dollars. For the convenience
of the reader, the results for the year ended June 30, 2001, have been converted
into U.S. dollars, at the prevailing rate of exchange as indicated below the
chart.

AS AT JUNE 30
-------------
2001 2001 2000 1999 1998 1997
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(US) (1) (IN THOUSANDS)

CONSOLIDATED BALANCE SHEET DATA:

Cash US$90. $136. $116. $5. $46. -
Current Assets 483. 731. 968. 746. 635. 618.
Franchise Rights 1,796. 2,720. 3,060. 3,400. 8,573. 9,566.
Total Assets 3,835. 5,808. 6,320. 6,113. 14,029. 12,888.

Current Liabilities 485. 735. 847. 3,355. 3,202. 1,402.
Working Capital (Deficit) (3.) (4.) 121. (2,609.) (2,567.) (783.)
Long Term Liabilities 2,145. 3,248 3,662. 1,949. 1,073. 1,938.
Stockholders' Equity 1,205. 1,825 1,811. 809. 9,754. 9,549.

(1) The Company's financial results are expressed in Canadian Dollars. For
the convenience of the reader only, the results for the last fiscal year
have been converted into United States Dollars at the Bank of Canada rate
on: June 30, 2001 Conversion rate: One (1)(US) Dollar equals: CDN$1.5145

ITEM 6 SELECTED FINANCIAL DATA (CONT'D)
- --------------------------------------------------------------------------------

AS AT JUNE 30
-------------
2001 2001 2000 1999 1998 1997
---------------------------------------------------------------------
(US) (1) (IN THOUSANDS, EXCEPT FOR PER SHARE AND RESTAURANT DATA)

CONSOLIDATED STATEMENT OF INCOME DATA:
REVENUE

Royalties US $934. $1,415. $1,447. $ 1,376. $ 1,440. $ 1,683.
Supplier incentives,
commission and other 572. 867. 1,001. 1,010. 1,097. 1,026.
Sales of managed franchise stores 484. 733. 879. 690. 817. 608.
Proprietary products 326. 494. 443. 433. 449. 511.
Franchise fees 105. 159. 175. 134. 218. 200.
Construction Revenue 135. 412. 613. 503.
----------------------------------------------------------------------
Total 2,421 3,668. 4,080. 4,055. 4,634. 4,531.
----------------------------------------------------------------------

EXPENSES
Head office administration 1,132. 1,714 1,816. 1,739. 1,849. 1,796.
Managed franchise stores 549. 832. 694. 662. 714. 473.
Amortization 339. 514. 452. 212. 818. 987.
Franchising - - 1. 1. 7. 25.
Interest 69. 105. (174.) 246. 111. 157.
Management fees 33. 50. - - - -
Proprietary products 290. 439. 387. 372. 397. 440.
Construction Expenses - - 116. 330. 532. 503.
Restructuring costs - - - 6,207. - -
Write-down of investments in
public company - - 48. 1,525. - -
Legal settlements - - (261.) 1,250. - -
Bad debts - notes receivable -. -. - 457. - -
----------------------------------------------------------------------
Total 2,412. 3,654. 3,079. 13,001. 4,428. 4,381.
----------------------------------------------------------------------

Income (Loss) before income taxes 9. 14. 1,001. (8,946.) 206. 150.
- - - - - -
----------------------------------------------------------------------

Net Income 9. 14. 1,001. (8,946.) 206. 150.
======================================================================

Avg. No. of Shares Outstanding (2) 15,596. 15,596. 8,234. 6,341. 6,341. 6,341.
Earnings per Share 0.00 0.00 0.00 (1.41) 0.03 0.00
======================================================================

No. of units in Chain at year-end 106. 106 115. 121. 135. 142.

(1) The Company's financial results are expressed in Canadian Dollars. For the
convenience of the reader only, the results for the last fiscal year have
been converted into United States Dollars at the Bank of Canada rate on:
June 30, 2001 Conversion rate: One (1) (US) Dollar equals: 1.5145

(2) The Company has 15,426,692 shares outstanding. Earnings per share is
calculated based on the weighted average number of shares outstanding for
the period. As described in this filing, the Company restructured its
capital with a 1:3 reverse split of its common stock on July 10, 2000.

ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
(All amounts are in Canadian $ unless otherwise stated)

SAFE HARBOR STATEMENT

Certain statements in this Form 10-K, including anticipated store
openings, planned capital expenditures and trends in or expectations
regarding the Company's operations, constitute "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements are based on currently available
operating, financial and competitive information, and are subject to
various and sometimes numerous risks and uncertainties. Actual future
results and trends may differ significantly.

Factors which may impact future results, include, but are not limited
to, raw materials pricing and availability, changes in economic
conditions, the competitive environment of the quick-service industry,
the continued ability of the Company and its franchisees to obtain
suitable locations at reasonable lease rates, the Company's ability to
successfully execute business plans, the effect of legal proceedings,
and other risks whether detailed in this Form 10-K and in the Company's
10-Q filings, or unforeseen.

GENERAL

- - THE YEAR ENDED JUNE 30, 2001 COMPARED TO THE YEAR ENDED JUNE 30, 2000

During the 12 month period ending June 30, 2001, Treats International
Enterprises, Inc. ("TIEI" or the "Company") through its wholly
owned subsidiaries derived 39% of its Revenue from royalties, 20% from
retail sales of corporately managed stores, 24% from supplier
incentives, commissions and other, 4% from franchising activities and
13% from the sale of certain proprietary products.

The Company's results for the fiscal year ended June 30, 2001 reflect
the reshaping of TIEI. The significant factors impacting the Company's
results for the last fiscal year include the loss incurred on the
operation of Managed franchise stores. Other factors impacting this
fiscal year's results were limited Franchising and, as a consequence,
Construction revenue. These factors resulted in lower than expected
revenues and higher than anticipated expenses. Net Income for the
Fiscal Year ended June 30, 2001 was $13,703 compared to $1,001,600 for
fiscal 2000.

It should be noted that the previous fiscal year included a one time
gain of $534,600. Comprised of $273,400 in Interest forgiveness and a
Legal settlement provision reversal of $261,200. Other influences on
the Company's Revenue and Expenses are described in detail in "Results
Of Operations" below.

ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONT'D)
- --------------------------------------------------------------------------------
(All amounts are in Canadian $ unless otherwise stated)

GENERAL (CONT'D)

The past year has been eventful for TIEI. The Company negotiated a
number of amendments to existing loan agreements with several secured
creditors and effectuated a 1 for 3 reverse split of its issued and
outstanding common shares. With this significant realignment
successfully completed, TIEI intends to conduct a strategic evaluation
to review opportunities that will enhance shareholder value.

On May 4, 2000 the majority of the shareholders of the Company,
representing 59.7% of the issued and outstanding shares of the Company,
consented to a 1 for 3 reverse split of the Company's common stock. The
transaction was subsequently approved by the Board of Directors on May
8, 2000. The 1 for 3 reverse split became effective on July 10, 2000.
The current number of issued and outstanding common shares is
15,426,692.

In February of 2001 the Company renewed the terms of the first mortgage
on its head office building, from monthly principal payments of $5,000.
plus interest at a fixed rate of 6.8%, to weekly principal payments of
$671. plus interest at a fixed rate of 8.5%. The term was extended from
the 80 months remaining to 780 weeks (180 months).

The Company, in March of 2001, amended a loan agreement with one of its
lenders, the Business development Bank of Canada ("BDC") Under the
previous terms of the loan agreement, the Company made monthly
principal payments of $4,200 plus a fixed interest rate of 11%. At that
time there were 47 months left in the term. Under the loan amending
agreement, the term was extended to 60 months and principal payments
were reduced to $1,960 plus a fixed interest rate of 10.4%.

Management believes that TIEI continues to be well positioned for the
continued quality growth of its core franchise concept "Treats" while
at the same time entertaining other growth opportunities, including
acquisition(s) of related concepts which match well defined
predetermined criteria.

The Company's fiscal year end is the Saturday closest to June 30. The
2000 fiscal year end had 53 weeks. The fiscal year ending June 30, 2001
includes 52 weeks of operation.

RESULTS OF OPERATIONS

REVENUE. Revenue for the year ended June 30, 2001 decreased $414,000 or
10.1% to $3,667,000 from $4,081,000 for the same period last year. The
decrease in revenue can be primarily attributed to a decrease of
$135,000 or 100% in construction revenue and a decrease of $134,000 or
13.4% in Supplier incentives, commissions and other to $867,000 from
$1,001,000 in the previous fiscal year. Other factors which impacted
revenue were:

- Royalties decreased $33,000 or 2.3% to $1,414,000 compared to
$1,447,000 for the same period last year.

- Franchising decreased $16,000 or 9.1% to $159,000 compared to
$175,000 for the same period last year.

- Proprietary products sold to distributors for distribution to the
franchised and corporately managed locations increased $51,000 or
11.5% to $494,000 compared to $443,000 for the same period last year.

EXPENSES. Expenses for the fiscal year ended June 30, 2001 increased by
$574,000. There are a number of unusual events in the previous fiscal
year that caused this variance. The most significant ones were:

In the previous fiscal year a decision was made to reverse $261,000 in
provisions for Legal settlements as management was of the opinion that
the Company had over provided. There was no charge to Legal settlements
in this fiscal year.

Similarly, the Company was able to record a reversal of interest
charges in the amount of $273,000. As described in detail in the
Management's Discussion and Analysis of Financial Condition and Results
of Operations for the previous fiscal year, which ended June 30, 2000.
Additionally expenses were impacted by the following factors:

- Cost associated with Managed franchised stores increased $137,000 or
19.7% to $831,000 from $694,000.

RESULTS OF OPERATIONS (CONT'D)

EXPENSES (CONT'D)

- Head office and administration expenses decreased $103,000 or 5.7% to
$1,714,000 from $1,817,000 for the same period last year.

- The cost of purchasing certain proprietary products for resale to
distributors increased $52,000 or 13.4% to $439,000 compared to
$387,000 for the same period last year.

- Interest expense increased by $6,000 or 6.1% to $105,000 compared to
$99,000 for the same period last year.

- Amortization increased by $61,000 or 13.5% to $513,000 from $452,000
in the previous fiscal year.

CAPITAL RESOURCES - June 30, 2001

The Company's projected capital asset requirements for the current
fiscal year, are not very demanding.

LIQUIDITY AND CASH FLOW - June 30, 2001

The working capital deficit at the year end was $4,000 compared to a
working capital of $121,000 for the same period last year.

The cash flow from operations during fiscal 2001 decreased by $121,000
to $810,000 compared to $931,000 in the previous fiscal year.

DEBT TO EQUITY RATIO

The ratio of debt to equity as at June 30, 2001 was 2.18 to 1 compared
to 2.49 to 1 in the previous fiscal year.

IN THE YEAR:

The implementation of the "direct bank transfer" system which
automatically withdraws royalty, advertising fund and receivable
payments from franchise owners' bank accounts on a weekly basis has
continued over the year. Virtually all franchise owners now use this
system to make weekly payments of royalties, ad fund contributions and
promissory note installments.

The Company also continued to refine the new design appearance for its
stores which has been very well received by customers, franchise owners
and landlords alike. The updated interior and exterior decor provides
for a more comfortable and relaxing atmosphere. It is extremely well
suited for stores located in office complexes and educational
facilities.

The Company continues to invest in computer hardware and software to
improve efficiency in analysis, reporting, planning and new store
design.

Prior to the fiscal year end, TIEI concluded negotiations and renewed
the contracts with the Quaker Oats Company of Canada, for the
manufacturing and supply of dry bakery mixes to the Treats franchises
as well as with Nestle Foodservice for the supply of roasted coffee.
The combined annual value of these contracts is approximately $2.5
million.

As a result of a new franchise law, proclaimed in the province of
Ontario, the Company has prepared and filed a disclosure document, not
unlike the Uniform Franchise Offering Circular required in many of the
states. A similar disclosure document has been required for the
province of Alberta.

ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT'D)
- --------------------------------------------------------------------------------
(All amounts are in Canadian $ unless otherwise stated)

GENERAL

- - THE YEAR ENDED JUNE 30, 2000 COMPARED TO THE YEAR ENDED JUNE 30, 1999

During the 12 month period ending June 30, 2000, Treats International
Enterprises, Inc. ("TIEI" or the "Company") through its wholly
owned subsidiaries derived 41% of its Revenue from royalties, 16% from
retail sales of corporately managed stores, 26% from supplier
incentives, commissions and other, 4% from franchising activities, 10%
from the sale of certain proprietary products and 3% from construction
revenue.

The Company has continued, in the 4th quarter, to show positive trends
resulting in Net Income for the Fiscal Year ended June 30, 2000 of
$1,002,000 compared to a Loss of $8,945,000 for fiscal 1999. It should
be noted however that the significant loss incurred by the Company for
the previous fiscal year was the result of certain management decisions
which are described in detail in Management's Discussion and Analysis
of Financial Condition and Results of Operations for the fiscal year
ended June 30, 1999 on pages 23 and 24.

The Company's fiscal year end is the Saturday closest to June 30. The
1999 fiscal year end had 52 weeks. The fiscal year ending June 30, 2000
will include 53 weeks of operation.

On February 29, 2000, the Company was notified by Riverdale Capital
Group Inc. (formerly 3722121 Canada Inc.), ("Riverdale") a company
incorporated under the laws of Canada that it had acquired the holdings
of the Royal Bank of Canada and its wholly owned subsidiary The Royal
Bank Capital Corporation (collectively "RBCC") in TIEI. RBCC was until
that time the single largest shareholder of TIEI as well as it largest
creditor.

Shareholders of Riverdale include Mr. Paul J. Gibson, President and
Chief Executive Officer of TIEI, John A. Deknatel, Chief Operating
Officer of TIEI, and a number of other common shareholders in TIEI.
Neither Mr. Gibson nor Mr. Deknatel are officers or directors of
Riverdale.

Specifically Riverdale acquired from RBCC a subordinated debenture in
the amount of $1,129,562 plus accrued and unpaid interest of
approximately $370,000 as well as 5,409,825 non-voting, convertible,
series A preference shares and accrued dividend and 7,207,760 common
shares.

GENERAL (CONT'D)

Riverdale has notified TIEI that it has restructured the terms and
conditions of the debt instrument it acquired by forgiving the accrued
and unpaid interest and adjusting the interest rate from 8% to 4% per
annum. This gain in interest expense was accounted for by a one-time
credit of $273,000 to Interest expense on the Income Statement. The
debenture is due on March 1, 2007.

In May of 2000, Riverdale notified the Company that it intended to
exercise the conversion rights of the Series A preference shares and
accrued dividend it had acquired in the transaction with RBC based on
the original formula contemplated in the conversion rights. As a result
the Company issued 27,255,251 common stock to Riverdale. This increased
the number of issued and outstanding shares from slightly more than
19,000,000 to approximately 46,280,000 common shares.

This transaction resolved a number of issues which were before the
courts and TIEI and RBCC executed mutual releases pertaining to those
actions.

The Company's management sees these recent developments as very
positive for the long term future of TIEI and is currently reviewing
what other steps it might take to amend its capital structure with a
view to position itself for growth opportunities in Canada.

RESULTS OF OPERATIONS

REVENUE. Revenue for the year ended June 30, 2000 decreased $32,000 or
0.7% to $4,454,000 from $4,486,000 for the same period last year. The
decrease in revenue can be primarily attributed to a decreased of
$276,000 in the construction revenue. Other factors which impacted
revenue were:

- Royalties increased $14,000 or 0.8% to $1,821,000 compared to
$1,807,000 for the same period last year.

- Supplier incentives increased $180,000 or 17.8% to $1,190,000
compared to $1,010,000 for the same period last year.

RESULTS OF OPERATIONS (CONT'D)

REVENUE (CONT'D)

- Royalties increased $14,000 or 0.8% to $1,821,000 compared to
$1,807,000 for the same period last year.

- Supplier incentives increased $180,000 or 17.8% to $1,190,000
compared to $1,010,000 for the same period last year.

- Franchising increased $41,000 or 30.5% to $175,000 compared to
$134,000 for the same period last year.

- Proprietary products sold to distributors for distribution to the
franchised and corporately managed locations increased $10,000 or
2.2% to $443,000 compared to $433,000 for the same period last year.

EXPENSES. Expenses for the fiscal year ended June 30, 2000 decreased by
$9,980,000. There are a number of unusual events that caused this
variance.

In the fiscal year ended June 30, 1999 the Company had unusual expenses
in the amount of $8,945,000 as a result of the Company's decision to
write down the value of its Franchise Rights, its investment in a
public Company, and the value of stores and equipment acquired from
franchisees. In addition the Company in that year made a significant
one-time provisions for legal settlements and bad debts. Some of these
transactions resulted in a lower than usual amortization expense in the
year ended June 30, 1999. This is described in more detail in the MD &
A for the year ended June 30, 1999 in this section page (23).

As described in detail above, the holdings of the Royal Bank of Canada
in the Company were acquired by Riverdale Capital Group Inc. (formerly
3722121 Canada Inc.) in the fiscal year ended June 30, 2000. This
transaction resulted, inter-alia, that a portion of interest owing on a
debenture was reversed. This one-time reversal of interest expense
amounted to $273,000.

Excluding the unusual events described above, for the fiscal year ended
June 30, 2000 expenses decreased $146,000. This was primarily the
result of a decreased of $214,000 in the construction expenses.

Additionally expenses were impacted by the following factors:

RESULTS OF OPERATIONS (CONT'D)

EXPENSES (CONT'D)

- Cost associated with Managed franchised stores increased $32,000 or
4.9% to $694,000 from $662,000 as a direct result of the increase in
the number of corporately managed stores.

- Head office and administration expenses increased $21,000 or 1.0% to
$2,190,000 from $2,170,000 for the same period last year.

- The cost of purchasing certain proprietary products for resale to
distributors increased $15,000 or 3.9% to $387,000 compared to
$372,000 for the same period last year.

CAPITAL RESOURCES - June 30, 2000

The Company's projected capital asset requirements for the current
fiscal year, are not very demanding.

LIQUIDITY AND CASH FLOW - June 30, 2000

The working capital at the year end was $121,000 compared to a working
capital deficit of $2,609,000 for the same period last year. The
primary reason for the significant change in the working capital
resulted from the recent transaction in which Riverdale Capital Group
Inc. (formerly 3722121 Canada Inc.) acquired the holdings and debt by
RBCC in Treats and the subsequent restructuring of the terms and
conditions of the debt instrument.

The cash flow from operations during fiscal 2000 increased by $975,000
to $931,000 compared to $(44,000) in the previous fiscal year this was
primarily due to the Company incurring a net loss for the year ended
June 30, 1999 in the amount of $8,945,000 compromised largely of
non-cash write-downs as reflected in the statement of cash flows (see
page 34).

DEBT TO EQUITY RATIO

The ratio of debt to equity as at June 30, 2000 was 2.49 to 1 compared
to 6.56 to 1 in the previous fiscal year.

IN THE YEAR

In February the Company was notified by Riverdale Capital Group Inc.
(formerly 3722121 Canada Inc.), ("Riverdale") that it had acquired the
holdings of the Royal Bank of Canada and its wholly owned subsidiary
("RBCC") in TIEI. RBCC was until that time the single largest
shareholder of TIEI as well as it largest creditor. Specifically
Riverdale acquired from RBCC a subordinated debenture in the amount of
$1,129,562 plus accrued and unpaid interest of approximately $370,000
as well as 5,409,825 non-voting, convertible, series A preference
shares and 7,207,760 common shares.

This transaction resolved a number of issues which were before the
courts and TIEI and RBCC executed mutual releases pertaining to those
actions.

Riverdale restructured the terms and conditions of the debt instrument
it acquired by forgiving the accrued and unpaid interest and adjusting
the interest rate from 8% to 4% per annum and exercised the conversion
rights on the preference shares and accrued dividend it acquired. This
resulted in the number of issued and outstanding common shares of the
Company to increase from approximately 19 million to almost 46.3
million common shares.

In May of 2000, Riverdale notified the Company that it intended to
exercise the conversion rights of the Series A preference shares it had
acquired in the transaction with RBC based on the original formula
contemplated in the conversion rights. As a result the Company issued
27,255,251 common stock to Riverdale. This increased the number of
issued and outstanding shares from slightly more than 19,000,000 to
approximately 46,280,000 common shares. The Company's common stock
underwent a 1 for 3 reverse split at the end of June, resulting in
approximately 15.4 million issued and outstanding common shares.

The Company continued to actively encourage franchise owners to update
the appearance of existing stores using the new design criteria
developed. This year 6 stores underwent renovations. These renovations
have in virtually every instance resulted in increased sales
performance. The company intends to continue to actively encourage
franchise owners to adopt the new design criteria.

IN THE YEAR (CONT'D)

In January of 2000 the Company introduced the second component of the
TreatSations line, a variety of oatmeal bars. Even though the test
results were very positive, the introduction of the new line was not
well received and the Company has ceased to actively promote the new
line of oatmeal bars. The Company intends to continue to develop high
end products under the TreatSations banner.

The Company terminated the National Licensing Agreement for Chile and
Argentina it had entered into because of non-performance.

ITEM 7-A QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
- --------------------------------------------------------------------------------

The Company has a line of credit of $150,000 with its financial
institution where the interest rate is fixed to the prime interest rate
charged which fluctuates weekly. There are no commodity price risks.

ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------

TREATS INTERNATIONAL ENTERPRISES, INC.

Consolidated Financial Statements 2001 compared to 2000
Page 26 to 43

CONSOLIDATED
FINANCIAL
STATEMENTS

TREATS INTERNATIONAL
ENTERPRISES, INC.

JUNE 30, 2001 AND 2000

TREATS INTERNATIONAL ENTERPRISES, INC.

CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2001 AND 2000
(EXPRESSED IN CANADIAN DOLLARS)

INDEX

Page

28 Auditors' Report

29 - 30 Consolidated Balance Sheets

31 Consolidated Statements of Stockholders' Equity

32 Consolidated Statements of Income and Deficit

33 Consolidated Statements of Cash Flows

34 - 48 Notes to the Consolidated Financial Statements

AUDITORS' REPORT

TO THE STOCKHOLDERS OF
TREATS INTERNATIONAL ENTERPRISES, INC.

We have audited the consolidated balance sheets of TREATS INTERNATIONAL
ENTERPRISES, INC. as at June 30, 2001 and 2000 and the consolidated statements
of income and deficit, cash flows and stockholders' equity for the years ended
June 30, 2001, 2000 and 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards
in Canada. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at June 30,
2001 and 2000 and the results of its operations and its cash flows for the
years ended June 30, 2001, 2000 and 1999 in accordance with accounting
principles generally accepted in Canada (which also conform in all material
respects with accounting principles generally accepted in the United States).

Chartered Accountants

Toronto, Canada
September 5, 2001

TREATS INTERNATIONAL ENTERPRISES, INC.

CONSOLIDATED BALANCE SHEETS

JUNE 30, 2001 AND 2000
(EXPRESSED IN CANADIAN DOLLARS)

NOTE 2001 2000
- ---------------------------------------------------------------------------------------------------------
$ $

ASSETS
CURRENT
Cash 135,882 115,811
Accounts receivable 167,050 157,753
Current portion of notes receivable 173,302 159,289
Prepaid expenses and sundry assets 147,741 292,381
Construction work in process 106,710 242,492
---------------------------
730,685 967,726

FRANCHISES HELD FOR RESALE - 265,049

NOTES RECEIVABLE 3 823,470 717,362

INVESTMENT IN PUBLIC COMPANY 4 45,735 45,735

CAPITAL ASSETS 5 1,488,000 1,263,780

FRANCHISE RIGHTS 6 2,720,000 3,060,000
--------------------------
5,807,890 6,319,652
==========================

Approved on behalf of the Board:

____________________________Director

See the accompanying notes

TREATS INTERNATIONAL ENTERPRISES, INC.

CONSOLIDATED BALANCE SHEETS

JUNE 30, 2001 AND 2000
(EXPRESSED IN CANADIAN DOLLARS)

NOTE 2001 2000
- ---------------------------------------------------------------------------------------------------------
$ $

LIABILITIES
CURRENT
Accounts payable and accrued liabilities 496,143 449,995
Current portion of long-term debt 238,436 396,930
---------------------------
734,579 846,925

LONG-TERM DEBT 7 3,053,465 3,431,947

LEASE SECURITY DEPOSITS 195,226 229,863
---------------------------
3,983,270 4,508,735
---------------------------

COMMITMENTS AND CONTINGENCIES 8

STOCKHOLDERS' EQUITY

CAPITAL STOCK 9
Preferred
Authorized, 10,000,000 (2000-10,000,000)
non-voting, cumulative shares, par value U.S.$0.50
Issued, nil (2000 - nil ) shares - -
Common
Authorized, 25,000,000 (2000 - 25,000,000) shares,
par value U.S. $0.001
Issued , 15,426,692 (2000 - 15,426,692) shares 46,280 46,280
Additional paid-in capital 15,636,020 15,636,020
---------------------------
15,682,300 15,682,300
DEFICIT (13,857,680) (13,871,383)
---------------------------
1,824,620 1,810,917
---------------------------
5,807,890 6,319,652
===========================

See the accompanying notes

TREATS INTERNATIONAL ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

YEARS ENDED JUNE 30, 2001, 2000 AND 1999
(EXPRESSED IN CANADIAN DOLLARS)

---- PREFERRED SHARES ---- ---- COMMON SHARES ----
SHARES AMOUNT SHARES 1:3 REVERSE AMOUNT DEFICIT TOTAL
STOCK SPLIT
(NOTE 9)
- ------------------------------------------------------------------------------------------------------------------------------------
$ $ $ $ $

Balance, June 30, 1998 5,409,825 3,732,779 19,024,598 6,341,558 10,776,764 (4,755,163) 9,754,380

Net loss for the year - - - - - (8,945,044) (8,945,044)
----------------------------------------------------------------------------------------------------
Balance, June 30, 1999 5,409,825 3,732,779 19,024,598 6,341,558 10,776,764 (13,700,207) 809,336

Conversion of preference shares
into common shares (5,409,825) (3,732,779) 20,737,661 6,912,579 3,732,779 - -

Conversion of dividends into
common shares - - 6,517,590 2,172,555 1,172,757 - 1,172,757

Net income for the year - - - - - 1,001,581 1,001,581

Dividends - - - - - (1,172,757) (1,172,757)
----------------------------------------------------------------------------------------------------
Balance, June 30, 2000 - - 46,279,849 15,426,692 15,682,300 (13,871,383) 1,810,917
Net income for the year - - - - - 13,703 13,703

Balance, June 30, 2001 - - 46,279,849 15,426,692 15,682,300 (13,857,680) 1,824,620
====================================================================================================

See the accompanying notes

TREATS INTERNATIONAL ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF INCOME AND DEFICIT

YEARS ENDED JUNE 30, 2001, 2000 AND 1999
(EXPRESSED IN CANADIAN DOLLARS)

NOTE 2001 2000 1999
- -----------------------------------------------------------------------------------------------------
$ $ $

REVENUES
Royalties - net 15 1,414,417 1,447,426 1,376,577
Supplier incentives and other 866,919 1,000,786 1,009,898
Sales of managed franchise stores 732,950 879,129 690,139
Proprietary products 493,657 442,953 433,391
New construction - 135,256 411,260
Franchise fees 158,891 175,383 134,373
------------------------------------------------

3,666,834 4,080,933 4,055,638
------------------------------------------------
EXPENSES
Head office and administration 15 1,714,220 1,816,964 1,739,110
Managed franchise stores 831,529 694,483 661,788
Proprietary products 439,367 386,811 372,415
Construction expenses - 116,231 330,360
Interest on long-term debt 104,720 99,016 246,005
Management fees 50,000 - -
Write-down of investment in public
company - 47,616 1,524,561
Franchising - 1,250 1,375
Bad debts - notes receivable - - 457,245
Restructuring costs - - 6,206,598
Legal settlements - (261,211) 1,250,000
Interest forgiveness - (273,414) -
Amortization
Capital assets and franchise rights 513,295 451,606 138,523
Deferred costs - - 72,702
------------------------------------------------

3,653,131 3,079,352 13,000,682
------------------------------------------------

NET INCOME (LOSS) FOR THE YEAR 12 13,703 1,001,581 (8,945,044)

DEFICIT, BEGINNING OF YEAR (13,871,383) (13,700,207) (4,755,163)

DIVIDENDS ON PREFERRED SHARES - (1,172,757) -
------------------------------------------------

DEFICIT, END OF YEAR (13,857,680) (13,871,383) (13,700,207)
================================================

BASIC EARNINGS (LOSS) PER SHARE 13 0.00 0.00 (1.41)
================================================

See the accompanying notes

TREATS INTERNATIONAL ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEAR ENDED JUNE 30, 2001, 2000 AND 1999
(EXPRESSED IN CANADIAN DOLLARS)

2001 2000 1999
- --------------------------------------------------------------------------------------------
$ $ $

NET INFLOW (OUTFLOW) OF CASH RELATED
TO THE FOLLOWING ACTIVITIES

OPERATING
Net income (loss) for the year 13,703 1,001,581 (8,945,044)
Items not affecting cash
Amortization
Capital assets and franchise rights 513,295 451,606 138,523
Deferred costs - - 72,702
Capital assets - - (419,418)
Write down of franchise rights - - 5,228,388
Write down of investment in public company - 47,616 1,524,561

Write down of capital assets - - 978,210
Bad debts - notes receivable - - 457,245
Write off of deferred costs - - 195,864
Legal settlements - (261,211) 1,250,000
--------------------------------------------

526,998 1,239,592 481,031
Changes in non-cash operating items 282,635 (308,351) (524,612)
--------------------------------------------
809,663 931,241 (43,581)
--------------------------------------------
FINANCING
Long-term debt (536,976) (390,177) 147,645
Dividends on preferred shares - (1,172,757) -
--------------------------------------------

(536,976) (1,562,934) 147,645
--------------------------------------------
INVESTING
Franchise stores held for resale - (265,049) -
Notes receivable (120,121) (137,824) (159,047)
Purchase of capital assets - net of
re-allocation of stores held for resale (132,465) (27,394) (24,779)
Advertising commitment - - 94,576
Purchase of franchise rights - - (55,674)
Issuance of common shares - net of
preference share conversion - 1,172,757 -
--------------------------------------------
(252,586) 742,490 (144,924)
--------------------------------------------

NET CASH INFLOW (OUTFLOW) 20,071 110,797 (40,860)

CASH POSITION, BEGINNING OF YEAR 115,811 5,014 45,874
--------------------------------------------

CASH POSITION, END OF YEAR 135,882 115,811 5,014
============================================

SUPPLEMENT CASH INFORMATION
Interest paid 104,720 99,016 246,005
Income taxes paid - - -

See the accompanying notes

TREATS INTERNATIONAL ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2001 AND 2000
(EXPRESSED IN CANADIAN DOLLARS)

1. DESCRIPTION OF BUSINESS

Treats International Enterprises, Inc. (the "Company"), incorporated under
the laws of the state of Delaware, is an international franchisor carrying
on the business of selling the right to market the Treats System. The Treats
System entails the preparation and sale of cookies, muffins and other
specialty coffees as well as food and beverage products in retail stores
using a system and methodology of marketing developed and designed by the
Company and identified by the trademark TREATS. As at September 5, 2001,
there are 109 retail units in Canada utilizing the Treats System. 104 of
these units are owned and operated by franchisees; 5 are corporately
managed.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in Canada (which also conform in
all material respects with accounting principles generally accepted in the
United States) and include the following significant accounting policies.

PRINCIPLES OF CONSOLIDATION

These consolidated financial statements comprise the accounts of the Company
and its wholly -owned subsidiaries, as follows:

- Treats Inc.
- Treats Ontario Inc.
- Chocolate Gourmet Treats Limited
- Treats Canada Corporation

All intercompany transactions and balances have been eliminated.

TREATS INTERNATIONAL ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2001 AND 2000
(EXPRESSED IN CANADIAN DOLLARS)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

The preparation of financial statements in conformity with generally
accepted accounting principles in Canada requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. These estimates are reviewed periodically, and, as adjustments
become necessary, they are reported in earnings in the period in which they
become known.

The most significant estimates included in these financial statements are
the valuations of accounts receivable and notes receivable and the
amortization on capital assets and franchise rights. Actual results could
differ from those estimates.

REVENUE RECOGNITION

Franchise fees and construction revenue arises on the sale of national, area
and store franchises. Franchise store revenue is recognized as income when
the respective purchase and sale agreements have been signed, all material
conditions relating to the sale have been substantially completed by the
Company or the franchise store has commenced operations. Revenue from
national and area franchise agreements is recognized when the area
development agreement has been signed or all substantial obligations of the
Company have been completed.

When payment for the sale of a national or area franchise is based on a
contract over a period longer than twelve months, the Company recognizes
revenue based on the assessment of collectibility. The total contract is
recorded as deferred revenue, and revenue recognition commences when
payments in excess of 25% of the total contract have been received and
management has ascertained that there is a sufficient level of certainty
that the balance of the contract is collectible.

Deposits that are non-refundable under the franchising agreement are
recognized as franchising revenue when received.

TREATS INTERNATIONAL ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2001 AND 2000
(EXPRESSED IN CANADIAN DOLLARS)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

REVENUE RECOGNITION (CONT'D)

Royalties are recognized when they are earned, based on a percentage of the
franchisees' sales on a weekly basis.

Supplier incentives are recognized in the period to which they apply.

LONG TERM INVESTMENTS

Long term investments are recorded at cost. Where there has been a loss in
value of an investment that is other than a temporary decline, the
investment is written down to recognize a loss, which is included in the
determination of income.

CAPITAL ASSETS AND AMORTIZATION

Capital assets are recorded at cost less accumulated amortization.
Amortization is provided for at rates intended to write off the assets over
their estimated economic lives, as follows:

Building - 20 years straight-line
Furniture, fixtures and equipment - 5 years straight-line
Corporate owned stores reacquired
from franchisees - 5 years straight-line
Corporate owned store equipment
reacquired from former
franchisees - 5 years straight-line

FRANCHISE RIGHTS

Franchise rights are carried at the lower of cost less accumulated
amortization, and fair market value. Amortization is provided for on the
straight-line basis over 10 years.

TREATS INTERNATIONAL ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2001 AND 2000
(EXPRESSED IN CANADIAN DOLLARS)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

BASIC EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share are calculated using the daily weighted
average number of common shares outstanding during the fiscal year.

FUTURE INCOME TAXES

The Company uses the asset and liability method of accounting for income
taxes. This method requires recognition of future income tax assets and
liabilities for the expected future income tax consequences of events that
have been included in the financial statements or income tax returns using
current income tax rates. Future tax assets, if any, are recognized only the
extent that, in the opinion of management, it is more likely than not that
the future income tax assets will be realized. Future income tax assets and
liability are adjusted for the effects of changes in tax laws and notes on
the date of the enactment or substantive enactment.

TREATS INTERNATIONAL ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2001 AND 2000
(EXPRESSED IN CANADIAN DOLLARS)

2001 2000
- -----------------------------------------------------------------------------------------

3. NOTES RECEIVABLE

Notes receivable are due from franchisees with interest rates varying from
6% to 8% and are repayable in scheduled instalments which mature from July
2001 to June 2020.

$ $

Notes receivable, net of allowance for doubtful
accounts of nil (2000 - nil) 996,772 876,651
Less current portion (173,302) (159,289)
---------------------------
823,470 717,362
===========================

4. INVESTMENT IN PUBLIC COMPANY

In 1998, the Company sold the U.S. area rights for consideration of
2,800,000 class "A" convertible preference shares in EMC Group, Inc., a U.S.
public company incorporated in the State of Florida, via a management
buy-out by former employee of the Company. During 1999 and 2000, this
investment was written down by $1,572,000. On June 18, 2001, the Company
agreed to convert its 2,800,000 class "A" convertible preference shares for
200,000 common shares. As at the date of the auditor's report, the shares of
EMC were trading at $.03 U.S., however, management believes that there has
not been a further permanent decline in value and accordingly, the
investment has not been written down below its current carrying amount.

TREATS INTERNATIONAL ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2001 AND 2000
(EXPRESSED IN CANADIAN DOLLARS)

2001 2000
- -----------------------------------------------------------------------------------------
5. CAPITAL ASSETS
Accumulated
Cost amortization ---Net book value---
------------------------------------------------------
$ $ $ $

Land 457,885 - 457,885 457,885
Building 625,000 93,750 531,250 562,500
Furniture, fixtures and equipment 834,944 760,748 74,196 46,890
Corporate owned stores reacquired
from franchisees 373,162 67,688 305,474 131,220
Corporate owned store equipment
reacquired from former
franchisees 252,990 133,795 119,195 65,285
-------------------------------------------------------
2,543,981 1,055,981 1,488,000 1,263,780
=======================================================

6. FRANCHISE RIGHTS
$ $

Franchise rights 3,400,000 3,400,000
Accumulated amortization 680,000 340,000
--------------------------
2,720,000 3,060,000
==========================

The Company obtained an independent estimate of value from Scott, Rankin,
Gordon & Gardiner, Chartered Accountants, supporting a valuation of
franchise rights in an amount in excess of carrying values.

TREATS INTERNATIONAL ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2001 AND 2000
(EXPRESSED IN CANADIAN DOLLARS)

2001 2000
- -------------------------------------------------------------------------------------------------------------

7. LONG - TERM DEBT

$ $
Business Development Bank of Canada
Term loan, payable in 60 monthly instalments of $1,960 plus interest at
10.4%, due March 23, 2006, secured by a general security agreement,
second mortgage on the land and building at 418 Preston Street, and a
personal guarantee of up to 50% by one of the shareholders 111,720 155,400
Appleford Capital Inc.
Term loan, bearing interest at 0% per annum, payable $5,800 per annum
in the first year, $78,000 in the next two years and the balance due
May 2008, secured by a general security agreement, general assignment
of book debts and franchise rights, pledge of all the shares in
subsidiary and associated companies (see note (a) below) 1,118,862 1,178,462
Riverdale Capital Group Inc.
Term loan, bearing interest at 0% per annum, payable principal and
interest of $74,100 to June 2002, $130,000 per annum, for the next
three years and the balance due March 2008, secured by a general
assignment of book debts and franchise rights, pledge of all the shares
in subsidiary and associated companies (see note (b) below) 1,086,542 1,171,117
P. Murphy in trust
Mortgage bearing interest at 7% payable in 26 bi-weekly instalments of
$500 on interest and principal, to June 2002, 190 bi-weekly instalments
of $1,000 on interest and principal, due October 2009, secured by land
and building at 418 Preston Street, Ottawa, Ontario and a General
Security Agreement 151,094 161,758
-------------------------

Carried forward 2,468,219 2,666,737

TREATS INTERNATIONAL ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2001 AND 2000
(EXPRESSED IN CANADIAN DOLLARS)

2001 2000
- -------------------------------------------------------------------------------------------------------------
7. LONG-TERM DEBT (CONT'D)

$ $
Brought forward 2,468,219 2,666,737

D. Crawford
Term loan, repayable in 26 bi-weekly instalments of $500 of principal
and interest at 10%, due June 2002, and 40 bi-weekly instalments of
$1,000 of principal and interest, due January 2004, secured by a
General Security Agreement 45,773 62,467
Bank of Nova Scotia
Term loan unsecured, repayable in 9 monthly instalments of $774 plus
interest at prime plus 2%, due March 9, 2002 6,963 16,247
La Caisse Populaire St. Charles Ltee
Mortgage, bearing interest at 8.5% per annum payable in 780 weekly
instalments of $671 on interest and principal, due January 2016,
secured by land and building at 418 Preston Street in Ottawa, Ontario 295,004 325,012
Other long-term debt
Non-interest bearing, with various terms of repayment ending in 2005 64,766 63,303
Legal settlements, non-interest-bearing, payments
of $104,000 annually, with various terms of payment ending in 2007 411,176 695,111
-------------------------
3,291,901 3,828,877
Less current portion (238,436) (396,930)
-------------------------
3,053,465 3,431,947
=========================

TREATS INTERNATIONAL ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2001 AND 2000
(EXPRESSED IN CANADIAN DOLLARS)

7. LONG-TERM DEBT (CONT'D)

(a) On July 2, 2000, Appleford Capital Inc., amended the terms of the loan
which became interest-free.

(b) On July 2, 2000, Riverdale Capital Group Inc., a corporation with 9% of
its outstanding common shares owned by the Chief Executive Officer of the
Company and 40% by family members of the Chief Executive Officer of the
Company, amended the terms of the loan which became interest-free.

Interest expense for the year related to long-term debt was $104,720
(2000 - $99,016, 1999 - $246,005).

The minimum future principal repayments required over the next five
years are as follows:

2002 238,436
2003 354,356
2004 345,575
2005 345,995
2006 304,014
Thereafter 1,703,525
---------
3,291,901
=========

TREATS INTERNATIONAL ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2001 AND 2000
(EXPRESSED IN CANADIAN DOLLARS)

8. COMMITMENTS AND CONTINGENCIES

Two judgements in the total amount of $127,463 were issued against two of
the Company's wholly owned subsidiaries. Judgement in the amount of $73,628
is against a subsidiary company with no assets. It is managements' opinion
that a co-judgement of $53,835 will be settled whereby, the co-defendant
and/or a third party not related to the Company and its wholly owned
subsidiaries will be responsible for the judgement and accordingly, no
provision has been recorded.

The Company is a defendant in several actions brought by former franchisees,
including a former franchisee of a former national licensor, and landlords
arising in the normal course of business. The Company has counterclaimed
these actions and management is of the opinion that these claims are without
merit. As the outcome of these claims is not determinable at this time,
these financial statements do not include a provision for potential losses.
Liabilities, if any, resulting from these claims in subsequent years will be
recorded as the expenses are incurred.

The Company has lease commitments for corporate-owned stores and office
premises. The Company also, as the franchisor, is the lessee in most of the
franchisees' lease agreements. The Company enters into sublease agreements
with individual franchisees, whereby the franchisee assumes responsibility
for, and makes lease payments directly to, the landlord. The aggregate
rental obligations under these leases over the next five years are as
follows:

Year ending June 30 $

2002 2,729,190
2003 2,345,486
2004 2,073,184
2005 1,667,675
2006 1,291,978
Thereafter 1,767,143
----------
Total minimum payments* 11,874,656
==========

TREATS INTERNATIONAL ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2001 AND 2000
(EXPRESSED IN CANADIAN DOLLARS)

8. COMMITMENTS AND CONTINGENCIES (CONT'D)

* Minimum payments have not been reduced by minimum sublease rentals for
$11,033,048 due in future under non-cancellable subleases.

Year ending June 30, 2002 $

Minimum rentals 2,729,190
Less: sublease rentals (2,550,384)
----------
178,806
==========

9. CAPITAL STOCK

On July 10, 2000, the Company's Board of Directors authorized a 1:3
reverse stock split of the common stock. On July 2, 2000, the Company
advised the OTC Bulleting Board Coordinator, NASDAQ Market Operations,
accordingly. As a result of the reverse split, the original 75,000,000
shares of the Company's common stock issued were reduced to 25,000,000
shares. Par value of the common stock remained $0.001 U.S. per share.

The effect of the reverse stock split has been recognized retroactively in
the stockholders' equity accounts on the balance sheet as of June 30, 2001,
and in all share and per share data in the accompanying financial
statements.

CLASS NUMBER OF SHARES NUMBER OF
AUTHORIZED PAR VALUE SHARES ISSUED

Common 25,000,000 $.001 U.S. 15,426,692
Preference 10,000,000 $.500 U.S. -

TREATS INTERNATIONAL ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2001 AND 2000
(EXPRESSED IN CANADIAN DOLLARS)

10. ADVERTISING COSTS

The costs of advertising, promotion and marketing programs are charged to
head office and administrative expenses in the year incurred. Total
advertising costs for the years ended June 30, 2001 and June 30, 2000 were
$36,731 and $94,882, respectively, and are included in the accompanying
statements of income and deficit.

11. RELATED PARTY TRANSACTIONS

(a) On July 2, 2000, Riverdale Capital Group Inc., a corporation with 9% of
its outstanding common shares owned by the Chief Executive Officer of
the Company and 40% by family members of the Chief Executive Officer of
the Company, amended the term of the term loan which became
interest-free in prior years, interest of $16,117 for 2000 and nil for
1999 were paid to this Company. In addition, management fees of $25,000
were paid during the current year to this company.

(b) The office premises, land and building at 418 Preston Street, Ottawa,
was purchased from a trust in 1998, of which the beneficiaries are the
family of the Chief Executive Officer of the Company whose family owns
approximately 47.20% of the common stock of the Company. This real
estate was recorded in capital assets in 1998 based on the exchange
amount (note 5).

12. INCOME TAXES

The Company has utilized approximately $50,000 of its non-capital losses to
reduce its current income taxes as to nil. In addition, the Company has
approximately $100,000 of non-capital losses available to offset against
future taxable income expiring in 2008. The potential benefit of this loss
will be recognized in income when it is more likely, than not that such
benefit will be realized.

TREATS INTERNATIONAL ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2001 AND 2000
(EXPRESSED IN CANADIAN DOLLARS)

2001 2000 1999
- -----------------------------------------------------------------------------------------------------

13. BASIC EARNINGS (LOSS) PER SHARE
$ $ $

Basic earnings (loss) per share 0.00 0.00 (1.42)
=======================================
Weighted average number of common shares outstanding 15,426,692 15,426,692 6,341,533
=======================================

The calculation of fully diluted earnings per common share assumes that, if
a dilutive effect is produced, all convertible securities have been
converted, all shares to be issued under contractual commitments have been
issued and all outstanding options have been exercised at the later of the
beginning of the fiscal period and the option issue date. Fully diluted
earnings per share are not presented as they are anti-dilutive.

Earnings (loss) per share of common stock in 2001, 2000 and 1999 were based
on the weighted average number of shares outstanding during those periods,
after giving effect to a 1:3 reverse stock split effective July 10, 2000 and
retroactively applied.

14. FINANCIAL INSTRUMENTS

FAIR VALUE
The carrying amounts of accounts receivable, short-term notes receivable and
accounts payable and accrued liabilities approximates their fair value
because of the short-term maturities of these items.

The carrying amount of the long-term notes receivable from franchisees
approximates their fair value because the interest rates approximate market
rates.

The carrying amounts of certain long term debts do not approximate their
fair value because they do not bear interest (note 7 and 11 (a)).

The fair values of the term loans due to related parties are not
determinable, as these amounts are interest-free and, accordingly, can not
be ascertained with reference to similar debt with arm's length parties.

TREATS INTERNATIONAL ENTERPRISES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2001 AND 2000
(EXPRESSED IN CANADIAN DOLLARS)

14. FINANCIAL STATEMENTS (CONT'D)

FAIR VALUE (CONT'D)

Lease security deposits are not current; however, in the case of deposits,
no defined maturity exists. As such, the carrying value and the fair value
are assumed to be equal.

CREDIT RISKS

Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade accounts
receivable from franchisees. The Company sells its products to franchisees,
at times extending credit for such sales. Exposure to losses on receivables
is principally dependant on each franchisee's financial condition. The
Company monitors its exposure for credit losses and maintains allowances for
anticipated losses.

15. COMPARATIVE FIGURES

Prior year's figures have been reclassified to conform with the current
year's presentation.

ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
- --------------------------------------------------------------------------------

- No Disagreements or changes.

PART III

ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- --------------------------------------------------------------------------------

The following sets forth the names of the Company's Directors and Officers.

NAME AGE POSITION

Paul J. Gibson 46 President, C.E.O. and Director
John A. Deknatel 54 Chief Operating Officer
Peter-Mark Bennet 44 Director
Francois Turcot 41 Director of Finance

PAUL J. GIBSON

Mr. Gibson is President, C.E.O. Chairman of the Board of The Company. Mr. Gibson
has served as President and C.E.O. of TCC since its formation in 1988 and of
Treats Inc. since July 1990. Mr. Gibson also serves in various capacities of The
Company's wholly owned subsidiaries. From its formation in 1986 until the
amalgamation of certain companies in 1993, he was President and C.E.O. of TMG, a
predecessor company of Treats Inc.

JOHN A. DEKNATEL

Mr. Deknatel is C.O.O. of The Company. He also serves in various capacities for
The Company's wholly owned subsidiaries. Prior to joining The Company in 1991,
Mr. Deknatel served as Vice President and General Manager of Manchu Wok U.S.A.,
a division of Scott's Hospitality, of Toronto, Ontario.

PETER-MARK BENNETT

Mr. Bennett was appointed Director December 16, 1994. Since 2000 he has served
Bell Intrigna (Calgary) as Acting Director, retail products. From1998 to 200 he
has served TELUS Advanced Communications (Calgary) as Manager of Internetworking
Services. From August 1997 to October 1998 Mr. Bennett was Director of Marketing
for Neptec Design Group Ltd. of Ottawa. From July 1994 to July 1997 Mr. Bennett
was Director of Operations for Network Xcellence Ltd. (Ottawa). From July 1990
to June 1992 he was Vice-President of Treats Inc. Prior to July 1990 he was
Managing Director of Widely Held Northern & Eastern Investments Ltd.

FRANCOIS TURCOT

Mr. Turcot has been Comptroller of The Company since May 1991 and has been
promoted to Director of Finance in August 1996. Prior to joining The Company,
Mr. Turcot held the position of Comptroller with a Transport Company in Hull,
Quebec. From October 1986 to November 1989, Mr. Turcot was Comptroller at the
Ramada Hotel in Hull, Quebec.

ITEM 11 EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------

Set forth in the table below, is the cash compensation paid to the C.E.O. of the
Company and the total to all Executive Officers as a group:

US ($)
CAPACITIES IN CASH
NAME OF INDIVIDUAL WHICH SERVED COMPENSATION
- ------------------ ------------------- ------------

Paul J. Gibson Chairman and Chief
Executive Officer $76,000.

Executive officers as a group (3 people) $184,000.

- - There are no options or warrants granted to the present officers.

EMPLOYMENT AGREEMENT

On February 14, 1997 by way of a resolution of the Board of Directors severances
for the three officers of The Company were amended to reflect the years of
service, specifically 2 months of base compensation for every year of service.
Once a Senior Officer reaches 5 years of consecutive service, he/she is entitled
to a minimum of 2 years full compensation.

ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- --------------------------------------------------------------------------------

The following sets forth as of the date of September 18, 2001, the number and
percentage owned of record and beneficially, by each Officer and Director of the
Company and by any other person owning 5% or more of the outstanding shares.

PRINCIPAL SHAREHOLDERS & OFFICERS EFFECTIVE SEPTEMBER 18, 2001

# Shares of
Common stock %
Registered Ownership
-------------------------------

Paul Gibson Intrust (1) 287,847. 1.87%
418 Preston Street
Ottawa, Ontario (K1S 4N2)

John Deknatel 43,708. .28%
418 Preston Street
Ottawa, Ontario (K1S 4N2)

Access Investment Group Ltd. (2) 1,686,763. 10.93%
Sassoon House
Nassau, Bahamas

Francois Turcot 3,125. 0.02%
418 Preston Street
Ottawa, Ontario (K1S 4N2)
-------------------------------
Officers & Directors as a group 2,021,443. 13.10%
===============================

OWNERS IN EXCESS OF 5%

Ray MacLeod In Trust 1,066,667. 6.91%
RR#1m Finch, ON, Canada

ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (CONT'D)
- --------------------------------------------------------------------------------

NOTES

1. Paul J. Gibson may be deemed to be a promoter as such terms are defined
under the Securities Act of 1933.

2. Access Investment Group Ltd. is a company controlled by Mr. Paul J.
Gibson.

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------------------------------

RELATED PARTY TRANSACTIONS

(a) On July 2, 2000, Riverdale Capital Group Inc., a corporation with 9% of
its outstanding common shares owned by the Chief Executive Officer of
the Company and 40% by family members of the Chief Executive Officer of
the Company, amended the term of the term loan which became
interest-free. Management fees of $25,000 were paid during the year.

PART IV

ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------------

INDEX

Computation of Earnings Per Share -
Treasury Share Method........................................Page 54

Computation of Earnings Per Share -
U.S. GAAP - Treasury Share Method...........................Page 55

Auditors' Report on Financial Statement Schedules....................Page 56

ITEM 14 SCHEDULES (CONT'D)
- --------------------------------------------------------------------------------

COMPUTATION OF EARNINGS PER SHARE - U.S. GAAP - TREASURY SHARE METHOD

FOR THE FISCAL QUARTER ENDED FOR THE FISCAL YEAR ENDED
-----------------------------------------------------------------------------------
SEPTEMBER DECEMBER MARCH JUNE JUNE JUNE
2000 2000 2001 2001 2001 2000
-----------------------------------------------------------------------------------

BASIC EARNINGS PER SHARE

Net earnings $211,861. $130,620. $53,675. ($382,453). $13,703. $1,004,801.
Cumulative dividends 0. 0. 0. 0. $0. ($1,172,757.)
-----------------------------------------------------------------------------------
Net earnings after cumulative dividends 211,861. $130,620. $53,675. ($382,453). $13,703. ($167,956.)
===================================================================================

Common Shares outstanding at the
beginning of the period 15,426,616. 15,426,692. 15,426,692. 15,426,692. 15,426,692. 6,341,533.

Conversion of preference shares
and dividends into common
shares during the period 0. 0. 0. 0. 0. 9,085,160.
-----------------------------------------------------------------------------------

Weighted average number of Common
Shares outstanding at the end
of the period 15,426,616. 15,426,692. 15,426,692. 15,426,692. 15,426,692. 15,426,692.
-----------------------------------------------------------------------------------

BASIC EARNINGS PER SHARE $0.0137 $0.0085 $0.0035 ($0.0248) $0.0009 $0.0000
===================================================================================

FULLY DILUTED EARNINGS PER SHARE

Net earnings before imputed earnings $211,861. $130,620. $53,675. ($382,453). $13,703. ($167,956.)
===================================================================================

After tax imputed earnings from the
investment of funds received
through dilution $0. $0. $0. $0. $0. $0.

Adjusted net earnings $211,861. $130,620. $53,675. ($382,453). $13,703. ($167,956.)

Weighted average number of Common
Shares outstanding at the
beginning of the period 15,426,616. 15,426,692. 15,426,692. 15,426,692. 15,426,692. 6,341,533.

Weighed average Common Stock
equivalents based on conversion of
preference shares and dividends 0. 0. 0. 0. 0. 9,085,160.
-----------------------------------------------------------------------------------

Weighted average number of Common
Shares outstanding at the
end of the period 15,426,616. 15,426,692. 15,426,692. 15,426,692. 15,426,692. 15,426,692.

Fully diluted earnings per share $0.0137 $0.0085 $0.0035 ($0.0248) $0.0009 $0.0000
===================================================================================

ITEM 14 SCHEDULES (CONT'D)
- --------------------------------------------------------------------------------

COMPUTATION OF EARNINGS PER SHARE - U.S. GAAP - TREASURY SHARE METHOD

PRIMARY EARNINGS PER SHARE - U.S. GAAP

Net earnings $211,861. $130,620. $53,675. ($382,453). $13,703. $1,004,801.
Cumulative dividends 0. 0. 0. 0. 0. (1,172,757).
-----------------------------------------------------------------------------------
Net earnings after cumulative dividends $211,861. $ 130,620. $53,675. ($382,453). $13,703. ($167,956).
===================================================================================

Common Shares outstanding at the
beginning of the period 15,426,616. 15,426,692. 15,426,692. 15,426,692. 15,426,692. 6,341,533.

Conversion of preference shares and dividends
into common shares during the period 0. 0. 0. 0. 0. 9,085,160.
-----------------------------------------------------------------------------------
Weighted average number of Common
Shares outstanding at the end of
the period 15,426,616. 15,426,692. 15,426,692. 15,426,692. 15,426,692. 15,426,692.

BASIC EARNINGS PER SHARE $0.0137 $0.0085 $0.0035 ($0.0248) $0.0009 $0.0000
===================================================================================

FULLY DILUTED EARNINGS PER SHARE - U.S. GAAP

Net earnings as reported $211,861. $130,620. $53,675. ($382,453). $13,703. ($167,956).
===================================================================================

After tax imputed earnings from the
investment of funds received
through dilution $0. $0. $0. $0. $0. $0.

Adjusted net earnings $211,861. $130,620. $53,675. ($382,453). $13,703. ($167,956).

Weighted average number of Common
Shares outstanding at the beginning
of the period 15,426,616. 15,426,692. 15,426,692. 15,426,692. 15,426,692. 6,341,533.

Weighted average Common Stock
equivalent based on conversion of
preference shares and dividends 0. 0. 0. 0. 0. 9,085,160.

Weighted average number of Common
Shares outstanding at the
end of the period 15,426,616. 15,426,692. 15,426,692. 15,426,692. 15,426,692. 15,426,692.
-----------------------------------------------------------------------------------

Fully diluted earnings per share $0.0137 $0.0085 $0.0035 ($0.0248) $0.0009 $0.0000
===================================================================================

AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULES

TO THE BOARD OF DIRECTORS OF
TREATS INTERNATIONAL ENTERPRISES INC.

We have audited the consolidated balance sheet of Treats International
Enterprises Inc. as at June 30, 2001, 2000 and the consolidated statements of
income and deficit, cash flow and stockholders' equity for the years ended June
30, 2001, 2000 and 1999 and have issued our report thereon dated September 5,
2001; such consolidated financial statements and our report thereon are included
elsewhere herein. Our examinations also comprehended the financial statement
schedules of Treats International Enterprises, Inc. listed in Item 14 in its
Report on Form 10-K. In our opinion, such financial statement schedules, when
considered in relation to the basic consolidated financial statements, present
fairly in all material respects the information shown therein.

Horwath Orenstein LLP

Chartered Accountants

Toronto, Canada
November 12, 2001

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

TREATS INTERNATIONAL ENTERPRISES, INC.

November 12, 2001 By: \S\
-------------------------
PAUL J. GIBSON
Chairman of the Board
President & Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

November 12, 2001 By: \S\
-------------------------
JOHN DEKNATEL
Chief Operating Officer

November 12, 2001 By: \S\
-------------------------
FRANCOIS TURCOT
Director of Finance